Author: Cory Santos

Medicaid fraud harms far more than just the patients bilked out of that taxpayer-funded aid.

Just ask Arizona Attorney General Kris Mayes, whose office has been conducting an investigation into a sober-living homes scandal that could reportedly cost the state billions of dollars.

Don’t miss

• I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
• Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
• You don’t have to be a millionaire to gain access to this $1B private real estate fund. In fact, you can get started with as little as $10 — here’s how

“This [sober-living homes scandal] is something that was allowed to fester for way too long, and far too many people were hurt by it," Mayes shared with Fox 10 Phoenix. Each stolen dollar creates shortfalls in an already strained Medicaid system, adding to existing pressures from rising health care costs and growing demand.

As part of the investigation, Mayes’s office reportedly uncovered what it’s calling one of the largest fraud cases connected to the ongoing sober-living scandal. The total damage? A staggering $60 million in potentially fraudulent billings that sent cash to a behavioral health business, a church catering to African migrants, and even the nation of Rwanda.

At the center of this financial tornado stands Theodore Mucuranyana, a Phoenix pastor whose Hope Of Life International Church is now facing 10 felony counts of money laundering. And as this case makes its way through the courts, it serves as a stark reminder that these frauds directly impact all Americans.

When Medicaid money takes an unexpected journey

A Phoenix-based company, Happy House Behavioral Health, is accused of billing Arizona’s Medicaid system for $60 million worth of substance abuse and mental health treatment services that were either partially provided or — in many cases — not provided at all.

Just how brazen was the alleged fraud? Among the felony counts, Happy House is charged with billing the state for clients who were either incarcerated, hospitalized or even worse — dead.

According to the indictment, Happy House’s owners — Desire Rusingizwa and Fabrice Mvuyekure — each received checks from the business for $2.9 million. At the same time, the company allegedly paid a whopping $5 million to Hope of Life International Church, which later wired $2 million of that money to an "unnamed entity" in Rwanda, 12News reports.

And that church connection runs even deeper. Happy House also leases a building on church grounds from Hope of Life, creating a cozy financial relationship that prosecutors now claim was part of an elaborate money laundering operation.

While the 22 defendants entered not guilty pleas in Maricopa County Superior Court, one specific detail emerged: according to an attorney for two defendants, most — if not all — of the defendants come from Phoenix’s African migrant community.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

Attorneys push back against charges

As you might expect, the defendants’ attorneys have objected to charges and allegations levied against their clients. The pastor’s attorney, John Kolsrud, told 12News that the AG’s office was attempting to "deflect blame" for its own regulatory failures.

"Just because he rented his property out, he’s now being indicted on four different counts of fraud and abuse when he actually had nothing to do with this case," Kolsrud said of his client.

Attorney Ulises Ferragut, who represents a couple of service providers charged with racketeering, claimed his clients were unaware they were breaking the law.

"It seems to be a community of folks that were involved," he told 12News. "From what I’ve seen, a lot of them didn’t even realize that what they were doing was a crime."

A $2 billion problem

As was laid out above, this case involving Hope Of Life International Church and Happy House Behavioral Health is just the tip of a very expensive iceberg. The ongoing sober-living homes scandal that Mayes’s office is investigating has reportedly bilked Arizona taxpayers out of more than $2 billion to date.

"This is about a government failure,” Mayes shared with Fox 10 Phoenix. “This is going to take years to fix. It could take up to a decade to fix this.”

There is, however, some good news, as Mayes’s office has reportedly clawed back nearly $150 million in cash and assets during its investigation. But that’s still just pennies on the dollar compared to the estimated $2 billion allegedly defrauded by phony treatment programs.

As mentioned above, this level of fraud could directly affect all Americans throughout the country.

“Don’t be fooled into thinking that health care fraud is a victimless crime,” the National Health Care Anti-Fraud Association states on its website. “Health care fraud inevitably translates into higher premiums and out-of-pocket expenses for consumers, as well as reduced benefits or coverage.

“For many Americans, the increased expense resulting from fraud could mean the difference between making health insurance a reality or not.”

What to read next

• Financial aid only funds about 27% of US college expenses — but savvy parents are using this 3-minute move to cover 100% of those costs
• Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs

Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. Subscribe now.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Your credit card can be a lifeline in tough financial times, but it can also turn into a nightmare in the blink of an eye.

Just ask Andrew St. Hilaire, a small business owner who recently discovered his credit card had been compromised. The damage? A staggering $35,000 in unauthorized charges spanning multiple countries and continents — a spending spree that somehow bulldozed past his $23,000 credit limit.

Don’t miss

• I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
• Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
• You don’t have to be a millionaire to gain access to this $1B private real estate fund. In fact, you can get started with as little as $10 — here’s how

“It was charges after charges for jewelry, perfume, pharmacy stuff, but big ticket items, and then they’d stop for a steak and dinner somewhere,” St. Hilaire shared with CityNews from his home in Winnipeg, Manitoba.

But the real shock came when his bank, The Bank of Montreal (BMO), looked at this international shopping bonanza and determined that everything looked legitimate, refusing to classify the transactions as fraud despite the extremely unusual pattern of spending.

Now St. Hilaire finds himself locked in a financial predicament that would make even the most seasoned accountant break into a cold sweat.

Fraud claim gets denied

It all began in January when St. Hilaire discovered the fraudulent shopping spree that racked up a $34,447 bill and overshot his credit limit by more than 50%. While BMO hasn’t explained why it approved $12,000 beyond Hilaire’s credit limit, this isn’t uncommon with business credit cards.

Banks often allow transactions to exceed stated limits, especially for business accounts. When fraud occurs, multiple transactions can be processed simultaneously before the system flags suspicious activity, pushing the total well past the ceiling without triggering immediate blocks.

When he contacted BMO, St. Hilaire was told his fraud claim was invalid and that he didn’t do enough to protect his card. BMO told St. Hilaire that it had sent a one-time passcode to his email for two-step verification, and that passcode was reportedly used to gain access to his account.

“I didn’t get that email,” St. Hilaire stated. “If I had seen it, I probably would have looked into it and found the fraud sooner.”

St. Hilaire also notified BMO about a fraudulent $5,000 payment to his credit card from his bank account that he says he didn’t make. According to BMO, that payment allegedly came from a device that St. Hilaire used in the past.

After exhausting most of his options, St. Hilaire has filed a police report, as well as a claim with the Canadian ombudsman for banking services and investments.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

Why credit card companies deny legitimate claims

It’s a scenario that plays out worldwide, and while this might seem rare, the numbers tell a different story. Approximately 7% of legitimate fraud claims end up denied, according to Security.org, leaving cardholders to shoulder the financial burden themselves.

Here are some common reasons why credit card issuers might reject your fraud claim:

1. The “familiar fraud” flag: If the fraudulent purchase fits your spending pattern or location, your card issuer might assume you made the purchase and you’re just having buyer’s remorse and trying to pull a fast one.
2. Reporting delays: Credit card companies are skeptical of claims made weeks or months after the charge. Even though federal law gives you 60 days, many issuers start looking sideways at reports made after just a few days.
3. Shared account access: If you’ve ever given your card or PIN to a family member or friend, the issuer might argue you authorized that person to use your account, making all their purchases “authorized.”
4. Cardholder negligence: If the card company believes you failed to protect your card information, it might hold you responsible.
5. Transaction verification methods: For large transactions, if there’s evidence of a signature, PIN entry or two-factor authentication, card issuers will often conclude that it must have been you who approved the purchase.

How to fight back if your claim is denied

When your credit card company plays hardball with a fraud claim, it’s time to switch from defense to offense:

1. Escalate within the company: Ask to speak with a fraud department supervisor or manager who might have more authority to overturn decisions.
2. Request all evidence and documentation from your credit card issuer.
3. File complaints with regulatory authorities like the Consumer Financial Protection Bureau.
4. Contact your state attorney general’s office.

St. Hilaire is taking many of the necessary steps. But with his fraud claims shot down and BMO ending its business relationship with him because of his “fraud risk,” St. Hilaire is left wondering how any of this happened in the first place.

“Passwords, virus protection. I don’t know how things were compromised,” said St. Hilaire. “I’ve never lost a card, and I have the virus protection and the safeguards on my computer, which is what a reasonable person would have.”

5 tips to protect yourself from credit card fraud

Of course, the best protection against fraud is prevention. Here are a handful of practical tips to protect you from fraudulent charges on your bank accounts:

1. Set up instant alerts on your phone for all transactions: This single step catches most fraud within minutes, letting you shut it down before thieves can rack up multiple charges.
2. Inspect before you swipe: Give card readers at gas stations and ATMs a quick wiggle, as skimmers often feel loose. Stick to bank ATMs when possible, as most card skimming happens at convenience stores.
3. Use virtual card numbers for online shopping: Most major card issuers now offer this feature that creates temporary numbers for online purchases, keeping your real card number protected.
4. Don’t store your card info on websites.
5. Check your accounts weekly, not monthly.

Credit card fraud is a global problem, with billions of dollars being scammed from unsuspecting cardholders. And since the next scammer tactics are constantly being developed, vigilance (and a little bit of knowledge) is essential for staying safe.

What to read next

• Financial aid only funds about 27% of US college expenses — but savvy parents are using this 3-minute move to cover 100% of those costs
• Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs

Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. Subscribe now.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Living in a mobile home park should provide affordable housing, not toxic mold and sewage backups — but for many Florida residents, that’s exactly what they’re getting.

"The floor is coming up. Mold is terrible. My doctor told me to move," said one Jacksonville resident in an interview with News4Jax. But with a household income under $2,000 monthly and Florida’s median rent hitting $1,555, this resident has nowhere to go.

Don’t miss

• I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
• Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
• Gain potential quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10

"I can’t even begin to tell you what is wrong with this house, but there’s no overhang on this trailer,” said the resident, who requested anonymity as she fears her landlord may raise her rent for speaking out. “When it rains, it rains in the doors. It comes through the windows. Mold is on the walls. You have to keep washing the walls and bleach inside."

Now, a troubling new report reveals how corporate owners may be systematically neglecting these communities while hiking rents — and warns of what potential mobile home park residents need to know before considering this increasingly risky housing option.

The health-related costs of “affordable” housing

The study by Health in Partnership and Manufactured Housing Action paints a troubling picture of how corporate mobile home park owners are transforming once-affordable communities into health hazards.

The health concerns documented in the study include:

• Contaminated water causing illness and chronic health problems.
• Failing sewage systems creating unsanitary conditions.
• Accumulated debris attracting pests and creating safety hazards.
• Crumbling infrastructure leading to dangerous living environments.
• Extensive mold triggering respiratory problems.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

The affordable housing trap

What makes this situation particularly troubling is the apparent lack of alternatives for mobile home park residents. According to research from the University of Florida, the median rent for housing seekers in the state was $1,555 as of July 2024, nearly 20% higher than the national average of $1,302 in 2024.

More alarmingly, Florida has only 26 affordable rental units available for every 100 households with incomes lower than 30% of the area’s median income. This shortage of affordable housing creates a desperate situation where lower-income residents sometimes have no choice but to endure hazardous living conditions rather than face homelessness.

Mobile home parks often represent one of the last options for stable, lower-cost living in Florida, but now some residents are facing predatory fees that are leading them to financial ruin.

The same Jacksonville resident mentioned above also noted that her rent has steadily increased from the initial $800 agreement. "Well, now every time I turn around, there’s more than that," she said, describing additional "junk fees" that keep appearing on her bill. And these mysterious charges affect "everybody in this neighborhood.”

Another mobile home park resident, identified only as Gerard, pays $700 monthly just to rent the lot where his mobile home sits — nearly as much as those who rent both the trailer and the land.

"I don’t think it should be near that high, the problems we’re having out here are terrible," Gerard shared with News4Jax. "700 plus dollars to live here, and I find that a lot of money just to park a trailer. And you pay your own electric, your own water. There’s no benefit of being here other than having your trailer parked."

Florida’s Mobile Home Act coming up short for residents

Florida’s Statute 723, known as the "Florida Mobile Home Act," provides some protections for mobile home owners who rent lots in parks with 10 or more spaces. These protections include:

• Required disclosures of fees, rules and regulations before someone moves in.
• Limitations on evictions to specific grounds such as non-payment, rules violations or change in land use.
• Rights regarding improvements to mobile homes.
• Provisions for forming homeowners’ associations.
• Notice requirements for lot rental increases or changes in rules.

But based on Health in Partnership’s report, these protections don’t seem to do enough for mobile home park residents.

Report issues policy recommendations

The Health in Partnership’s “Home Sick” report offers the following policy recommendations based on its findings:

1. Strengthen housing standards through licensing, inspections and accountability mechanisms.
2. Protect residents with rent regulations, good-cause eviction policies and anti-retaliation measures.
3. Promote community-friendly ownership with funding and transition policies.
4. Address corporate speculation via zoning regulations, portfolio caps, divestment and taxation.

Practical tips to protect mobile home residents

So, what can those who may be considering moving into manufactured housing do to protect themselves? If you’re considering manufactured housing as an affordable option in Florida (or anywhere else for that matter), here are some important considerations:

1. Understand the park’s ownership structure. In most mobile home parks, you own the home but rent the land, creating a unique legal relationship.
2. Research the park owner. Corporate-owned parks may have different priorities than locally owned communities.
3. Inspect the unit thoroughly before buying or renting. Look for signs of water damage, mold, structural issues and infrastructure problems.
4. Review all fees and rules of the unit and park. Get a clear picture of lot rent, utility charges and any other fees before committing.
5. Check for a homeowners’ association (HOA). Active HOAs can provide collective bargaining power with park owners.
6. Understand your rights. Familiarize yourself with the Florida Mobile Home Act to know your legal protections.
7. Verify insurance options. Mobile homes often require specialized insurance that can be more expensive.
8. Have an exit strategy. Be aware that selling a mobile home in a park can be more challenging than selling a traditional home.

What to read next

• JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
• Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement

Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Loretta Byers had no concerns with re-upping her lease at her Las Vegas apartment — that is until she was hit with an unexpected $900 annual surcharge by her property management company.

Byers is just one of many residents at two Vegas apartment complexes where junk fees — or more specifically “tech package fees” — have been added to the cost of rent without consultation. Worse, management is forcing residents to sign addendums cementing the new fees — even though they weren’t part of the original lease agreements.

Don’t miss

• I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
• Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
• Gain potential quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10

Local authorities are now hoping to clamp down on these junk fees, seeking to help vulnerable citizens with their fight against corporate greed.

"More money. That’s what I believe,” Byers shared with KTNV Las Vegas when discussing the motives behind the new fees. “I really think it’s the greenbacks."

Vegas tenants hit with surprise internet fees

"No!" That was Byers’ emphatic response when KTNV Las Vegas reporter Darcy Spears asked Byers if she needed or wanted the new internet service her landlord was attempting to force on her.

Byers recently learned she would be charged an additional $75 monthly for Cox internet service. This came as a shock since she and her husband renewed their lease in February, 2025 — one that explicitly stated the "internet to your dwelling will be paid by you… directly to the utility service provider."

But despite this clear language in her contract, Byers received a letter dated April 29, 2025, informing her that the complex was changing terms for all tenants by adding this tech fee on top of current rent. The letter stated the fee would become part of her "standard lease obligations" and would require signing a lease addendum agreeing to these new terms.

"It’s being forced," said Byers. "Take it, or leave. And nobody wants to break their lease on purpose. I know I’m not going to. But I don’t want to feel that I’m going to be forced to do something because they want more money coming in."

But Intrigue Apartments, where Byers and her husband live, isn’t the only Vegas complex implementing this strategy. Residents at the Tides on Twain apartment complex also received similar notifications about a new mandatory $65 monthly internet fee for Cox’s service.

One Tides on Twain resident, who uses Cox’s ConnectAssist program for low-income households, currently pays just $30 monthly for internet. Under the new mandatory plan, her costs would more than double.

Like with Intrigue Apartments, the new changes at Tides on Twain were to come into effect on June 1.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

Management companies begin to backpedal

When confronted by KTNV’s 13 Investigates team, both Intrigue Apartments and Tides on Twain’s management companies quickly changed their tune about the surprise internet fees.

According to the management companies, their original notices contained significant errors in stating that the new internet charges would apply to all current residents starting June 1. Advanced Management Group, which oversees Intrigue Apartments, claimed it never intended to force existing residents with active leases to pay the new $75 monthly fee. Similarly, FPI Management insisted that its $65 fee announcement for tenants at Tides on Twain also contained errors.

Both companies have since backpedaled, stating the internet program was only meant to affect residents upon lease renewal or new tenants moving in.

Local authorities hoping to curb junk fees

With this story top of mind, Nevada politicians are looking to pass legislation designed to protect local residents from junk fees.

"I believe it’s predatory. I also believe it’s deceptive," Nevada Assemblymember Venicia Considine told KTNV Las Vegas. "The apartment complex is just telling all their residents it’s coming because there’s no law to stop it."

Considine is one of the backers of Assembly Bill 121, a recent measure that has already cleared both houses of the Nevada legislature and is awaiting signing by governor Joe Lombardo. AB 121 seeks to outlaw surprise charges and junk fees in rental contracts while also requiring more transparency to tenants. The bill mandates that rent be listed as one comprehensive number that includes all mandatory fees.

"If [something isn’t done], we are really sending a message that we are allowing corporations and hedge funds and private equities to come in here and take money from people deceptively. And I just don’t think that as a state, we want to be known for that," said Considine.

How renters can protect themselves from junk fees

While AB 121 seeks to address the issue of junk fees, it’s not as if Nevada residents have no protections from these predatory practices.

The biggest issue, it seems, isn’t existing legal protections for consumers, but rather that many tenants don’t understand their rights or feel powerless to enforce them, especially when faced with legal threats and complex lease documents with multiple addendums.

If you’re a tenant concerned about surprise fees, here are a few actionable steps you can take to protect yourself:

1. Document everything: Keep copies of all lease agreements, communications with management and payment records.
2. Carefully review your lease agreement: Before signing, request time to review the entire document, including all addendums. Note exactly what services are included in rent and which will be billed separately. You can also request a written, itemized list of all monthly charges.
3. Know your rights regarding changes: Landlords generally cannot change lease terms during the lease period unless the lease specifically allows for it or you agree to the changes. Nevada follows the principle that lease terms, once signed, are binding on both parties. Unilateral changes to existing lease agreements without tenant consent are generally not permitted.
4. Don’t sign addendums under pressure: If presented with a lease addendum, take time to review it. You are not obligated to sign immediately, so take your time and consider enlisting the help of an attorney so that you understand everything.
5. File a complaint: Report deceptive practices to your state’s Attorney General’s Bureau of Consumer Protection and the County Commissioner’s office.
6. Strength in numbers: Connect with neighbors facing similar issues. Collective action can be more effective than individual complaints.

As the battle against junk fees continues in Nevada, the experiences at Intrigue Apartments and Tides on Twain highlight a crucial reality: landlords often back down from illegal fee hikes when tenants stand their ground.

While Assembly Bill 121 represents a promising step toward protecting renters, your best defense is still vigilance and knowledge of your existing rights.

What to read next

• JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
• Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement

Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Holding on to $89,000 in debt can be overwhelming. And you might feel like you’re dealing with an impossible financial situation.

Your 401(k) might seem like the only lifeline available, but to be crystal clear: tapping into retirement savings should be your absolute last resort.

When you’re drowning in debt at any age, you’re in a particularly vulnerable position. But at 52 it can seem calamitous.

And with potentially 10-15 years left until retirement, you’re in the critical accumulation phase where your retirement savings should be growing substantially.

That combination of high-interest credit card debt and the temptation to raid retirement funds creates a perfect storm of financial issues that requires some immediate action.

Don’t miss

• I’m 49 years old and have nothing saved for retirement — what should I do? Don’t panic. Here are 6 of the easiest ways you can catch up (and fast)
• Robert Kiyosaki warns of a ‘Greater Depression’ coming to the US — with millions of Americans going poor. But he says these 2 ‘easy-money’ assets will bring in ‘great wealth’. How to get in now
• Gain potential quarterly income through this $1B private real estate fund — even if you’re not a millionaire. Here’s how to get started with as little as $10

What happens when you tap into your 401(k)

Dipping into your 401(k) might sound great. After all, it’s your money, just sitting there; why not cash in? If you’re 5-7 years from retirement with high-interest debt, the math sometimes favors taking a one-time withdrawal to clear that debt, especially if your debt interest rate significantly exceeds your 401(k)’s growth rate.

But you are likely more than a decade from your retirement, so it’s almost impossible to justify tapping into the savings right now. That’s because using your 401(k) to address debt comes with serious consequences that can severely derail your financial security in retirement.

Loans vs. hardship withdrawals

You have two main options for accessing your 401(k) funds before retirement:

1. 401(k) loans: You can typically borrow up to 50% of your vested account balance or $50,000, whichever is less. You’ll need to repay this with interest (usually prime rate plus 1-2%) within five years.

2. Hardship withdrawals: If your plan allows, you can withdraw funds for "immediate and heavy financial need." Credit card debt typically doesn’t qualify unless you’re facing eviction or foreclosure.

What’s the worst that could happen? A retirement disaster

It’s easy enough to state it plainly, but why should you avoid dipping into your 401(k)? Here’s your worst-case scenario:

• Immediate tax hit: A withdrawal (not a loan) triggers income taxes plus a 10% early withdrawal penalty if you’re under 59 ½ years old. On a $40,000 withdrawal, you could lose $14,000 or more to taxes and penalties.
• Devastating opportunity cost: Every $10,000 withdrawn at age 52 could cost you $21,500 in retirement funds by age 67 (assuming a 5% annual return).
• Loan default risks: If you take a loan and leave your job for any reason, the entire balance typically becomes due within 60-90 days. Failure to repay converts it to a distribution, triggering taxes and penalties.
• Bankruptcy protection lost: 401(k) assets are generally protected in bankruptcy, but once withdrawn, that protection disappears.

It’s recommended to avoid 401(k) withdrawals unless you’re facing an imminent threat to your living situation, like a foreclosure or eviction. The long-term consequences of tapping-in are just too extreme, especially at your age when any potential recovery time is limited.

Better alternatives to tackle your debt crisis

Before tapping retirement your funds, consider more sustainable approaches:

1. Balance transfer credit cards

For those with reasonably good credit despite high balances, a balance transfer card can provide breathing room with 0% interest for 12-21 months.

Let’s run the numbers on a theoretical scenario:

If you transferred $25,000 of your existing credit card debt to a card with an 18-month 0% APR offer:

One-time balance transfer fee: $25,000 × 3% = $750

Monthly payment needed to pay off in 18 months: $1,430

Total interest saved: Approximately $8,000 (compared to a 24% APR card)

This wouldn’t solve all your financial problems. However, it would give you the breathing space to continue working on your debt repayment plan or switching to another option.

Read more: Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it

2. Debt consolidation loan

A debt consolidation loan could combine your high-interest debts into a single, lower-interest payment. With fair credit, you might qualify for rates between 10-15% — significantly lower than credit card rates.

Benefits of personal or consolidation loans include:

Fixed payment schedule providing a clear debt-free date Potential interest savings of thousands over the life of the loan Improved cash flow with one manageable payment

3. Credit counseling and debt management plans

A nonprofit credit counseling agency can negotiate with creditors on your behalf, potentially reducing interest rates to as low as 8-11% and waiving fees. A debt management plan would:

• Consolidate your payments into one monthly amount
• Provide a structured 3-5 year repayment timeline
• Offer professional financial counselling support throughout the process

4. Bankruptcy as a strategic option

At 52 years old with $89,000 in debt, bankruptcy might actually be a more financially sound decision than raiding your retirement funds. Bankruptcy is often a last resort — and often seen as a personal failing — but it’s a legal financial tool designed specifically for situations like yours.

The truth is that bankruptcy, while damaging to your credit for 7-10 years, protects your retirement assets and gives you a chance at a fresh start. That said, filing for bankruptcy protection is a major decision and it’s recommended you consult with a bankruptcy attorney to understand if it’s right for your individual situation.

Strategic action plan to recover from your financial crisis

Based on everything covered, here’s a suggested plan of action, starting today:

1. Immediate step (next 7 days): Contact a nonprofit credit counseling agency for a free consultation to better understand all your options.

2. Short-term (next 30 days): Create a crisis budget that eliminates all non-essential spending. Every dollar you can save helps accelerate your debt payoff.

3. Medium-term (next 90 days): Based on the credit counseling assessment, commit to either a debt repayment plan, a debt consolidation plan, or filing for bankruptcy.

4. Long-term (next 12-24 months): Once your debt is under control, increase retirement contributions to make up for lost time. Delaying retirement by 2-3 years might help as well (as terrifying as that sounds).

Treat your retirement funds as absolutely untouchable except in life-threatening emergencies. The alternatives may be challenging, but they preserve your long-term financial security while still helping to address your immediate financial woes.

Remember: This debt crisis is temporary, but retirement insecurity would last the rest of your life — a time you could be enjoying your sunset years.Take a step back, think and make a decision today that your future self will thank you for.

What to read next

• JPMorgan sees gold soaring to $6,000/ounce — use this 1 simple IRA trick to lock in those potential shiny gains (before it’s too late)
• This is how American car dealers use the ‘4-square method’ to make big profits off you — and how you can ensure you pay a fair price for all your vehicle costs
• Here are 5 ‘must have’ items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you?
• How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement

Like what you read? Join 200,000+ readers and get the best of Moneywise straight to your inbox every week. Subscribe for free.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.